Ethereum price pops over $3,500 on expectations for spot Ethereum exchange-traded fund. The 11% jump this past week came through after the Chicago Board Options Exchange declared that it would list five spot Ethereum ETFs set to start trading on July 23.
These include those for Fidelity, VanEck, and Invesco, which have been much anticipated. The spot ETF approvals in May by the U.S. Securities and Exchange Commission also added to Ethereum's very bullish sentiment.
Benjamin Cowen of Into The Cryptoverse said he was troubled for the first reason: the initial "hype" created around these ETFs would wear off, and that might eventually lead to a fall in Ethereum's price if the supply continued to rise. Cowen drew attention to the fact that Ethereum has been rising and has added almost 150k ETH in the last three months.
If this trend continues, it is projected that by the end of the year, the supply will return to the pre-merge level, which could put downward pressure on prices.
On the other hand, onchain analyst Leon Waidmann identified a "supply crisis" in which the exchange balances had dropped to 10.2% while 39.3% of ETH was sitting locked in smart contracts. This lower level of available supply cushion prices in the face of rising issuance rates.
While the price of Ethereum has fluctuated greatly in the short term, most analysts still hold a bullish view concerning its future. According to Matt Hougan, the chief investment officer at Bitwise, Ethereum’s inflation rate has been at 0% in the last year. This means that with increased demand and minimal supply, the price may go up.
He also pointed out that 28% of Ethereum's supply is locked out of the market, which adds to the bullish outlook.
It also anticipates that the launch of spot Ethereum ETFs will attract significant capital inflows from institutional and retail investors, which may emulate what took place post-spot Bitcoin ETF. Ethereum still trades 29% lower than its record $4,890 level achieved in November 2021, suggesting the potential for upside.
Yet some analysts inject a little caution into Ethereum's case as they talk about the potential "sell-the-news" dynamic on the date of the first ETF approval. Indeed, that was what happened to Bitcoin ETFs last time: prices spiked on the approval date before settling down some days later. For Alvin Kan, COO of Bitget Wallet, the actual opportunity for long-term investment in Ethereum may arrive a while after the first-mover advantage has subsided.
Kan further commented that prices for Ethereum will now start climbing gradually after the first market reaction at the ETF launch subsides, buoyed by regular inflows into these new spot ETFs. Others share the same opinion, with some believing the introduction of these new ETFs will help catalyze the next bull run cycle for altcoins.
Once approved and launched, Ethereum ETFs will certainly be a game-changer. This will make Ethereum more accessible to traditional investors, thus increasing potential demand for it, possibly increasing its liquidity.
Turning to a technical analysis, on the seven-day relative strength index RSI, Ethereum hints at a moderately extended asset, though it remains well above fair value and could continue to rise. However, traders need to be cautious of short-term fluctuations in prices and other market factors.